Way back on Monday (that was two whole days ago, now), we said that maybe – just maybe – it was worth paying attention to the sharp decline in China’s ‘Nasdaq’, the ChiNext.
To start the week, the gauge of small-caps suffered its largest intraday loss since June 1 after the CSRC approved more IPOs last week and as investors generally fretted over valuations that average something like 40X.
“File this away for posterity, because we might be referring to it later on down the road,” we concluded.
Turns out “later on down the road” came 48 hours later – as in, “today.”
Because although the ChiNext closed up 0.2%, that fucker was down at least 1% early in the session and was well on its way to logging a four-day loss of 4%, which would have been the most since January 18.
Here’s a look at a fun 3-day chart:
See that late afternoon ramp we got today?
Well if you ask me, that looks a lot the “national team” or, in other words, I think it’s entirely fair to ask if maybe China just moved in and bought themselves some overvalued tech stocks to arrest the ongoing slide.
For now, we can use the term “arrest” simple to describe efforts to stop the bleeding by intervening in markets, but if you were following along when China’s equity bubble popped in the summer of 2015, you know that if things get bad enough, we’ll be using the term “arrest” to describe what happens to anyone who hits the “sell” button.